II. Governing Challenges

The digital economy poses multiple challenges that buck the conventional wisdom of governments, specifically in regards to data ownership, privacy, and jurisdiction. For instance, how does a criminal investigation in Germany gain access to a suspect’s data stored on Google’s server? While the server is physically located in Germany, Amazon as an entity is American. The articles and papers here are citations from the second section of Digital DNA: Disruption and the Challenges for Global Governance, and illustrate the current difficulties experienced by national and supranational governments.

Authors discuss the promises and challenges of digitization of the physical world, with a latter emphasis on the security challenges posed by digital data collected through corporate surveillance.

David Held, Anthony McGrew, David Goldblatt, and Jonathan Perraton, Global Transformations: Politics, Economics and Culture (Palo Alto, CA: Stanford University Press, 1999), and M. Ayhan Kose and Eswar Prasad, Emerging Markets: Resilience and Growth amid Global Turmoil (Washington, D.C.: Brookings Institution, 2010). Economic integration through trade agreements boosted the prosperity of even large economies that are less dependent on trade. Scott C. Bradford, Paul L. E. Grieco, and Gary Clyde Hufbauer, “The Payoff to America from Global Integration,” in C. Fred Bergsten, United States in the World Economy: Foreign Economic Policy in the Next Decade (Washington, D.C.: Peterson Institute for International Economics, 2005), pp. 65–109, calculated that gains from the WTO trade rounds enriched the U.S. GDP by about 9%. They estimated that the elimination of all remaining trade barriers would add another 4% to 5% to the U.S. GDP, a big win if it is achievable. A thoughtful critique is Dani Rodrik, The Globalization Paradox: Democracy and the Future of the World Economy (New York: Norton, 2012).

The authors in Global Transformations provide a new model of globalization to assess the processes of globalization in regards to political organization, military globalization, trade, finance, corporate productivity, migration, culture, and the environment. Kose and Prasad in Emerging Markets explore emerging market economies and their increasing role in international trade and financial flows. Authors in The Payoff to America from Global Integration discuss the payoffs of global integration such as efficiency through comparative advantage, economies of scale, technological spillovers, and import competition.

This report overviews the state of manufacturing in the U.S., highlighting its strengths and challenges, and ultimately argues in favor of the continued importance of manufacturing in the U.S. economy.

A Gartner report states that worldwide IT spending is projected to reach a total of $3.8 trillion by the year 2014. The report also states that enterprise software spending growth continues to be the strongest area of the forecast.

Bildt Commission. Global Commission on Internet Governance, “One Internet,” Final Report by the Centre for International Governance and the Royal Institute for International Affairs, 2016, http://ourinternet.org/report#chapter–preface

This report offers guidance for challenges regarding internet governance with advisory from a global research network. Challenges to internet governance span topics such as internet fragmentation, human rights, interconnection and access issues, cyber-security, trade, and others.

The Cisco Visual Networking Index provides key statistics and forecasting measures. The Index estimates that annual global IP traffic will reach 3.3 ZB by the year 2021 and that global IP traffic will increase nearly three times in the next 5 years.

Authors explore possible explanations for why the U.S. lags behind Asia in broadband, contending that the U.S. may lag behind Asia due to allowing for an oligarchic internet market that distorts competition, in comparison to broadband-leading countries South Korea and Japan.

An IDC study reports on the increase in the “Software as a Service” (SaaS) market, or the “cloud,” showing an annual increase of 25%. The increase in SaaS reflects the significant shift from traditional licensing of products to delivery via SaaS services.

Authors discuss how mobile apps have become the primary medium for delivering content and services to consumers. Authors contend that businesses which develop data collection and analytics within their mobile apps can significantly improve delivery, customer loyalty and acquisition, and value to consumers.

Study reports that Japan surpassed the U.S. as the biggest app market in October of 2013. Author suggests that while previously Japan has been closed off to Western games, the success of a few cross-border alliances with Western markets may trigger a race to form Western alliances among Japanese vendors.

Pwc forecasts that internet advertising will grow faster in the Asia Pacific than in North America through the year 2021. Internet advertising continuously grows in every market, but China drives the Asia Pacific in growth and revenue surging at a predicted 10.8% CAGR by 2021.

Statista reports on digital advertising revenue, where digital ad revenue in China was predicted at $43.9 billion dollars near the end of 2016. Other key insights include search advertising as the largest format of digital ads and that the number of mobile searches were generated twice that of desktops.

Brown and Marsden (Regulating Code, 2013) provide a good overview and analysis of the EU efforts.

Authors discuss challenges to internet governance propelled by swiftly changing internet technologies and uses. They explore five cases which demonstrate the “regulatory crisis” surrounding “privacy and data protection; copyright and creativity incentives; censorship; social networks and user-generated content; and net neutrality.” Authors recommend a “prosumer law” approach for governments, users, and markets in internet governance, with prosumer law structured to heighten competitive production of public goods. This includes innovation, public safety, and fundamental human rights.

Jonathan Kirshner, American Power after the Financial Crisis (Ithaca, NY: Cornell University Press, 2014).

Kirshner explores the effects on world power after the global financial crisis, making the argument that the crisis signaled the end of the “second postwar American order.” He argues that the crisis prompted a deterioration of U.S. political influence as well as the increased political influence of other states, most notably China. Kirshner expects a “new heterogeneity” which adds many more voices to the discussion surrounding the effective management of domestic and international money and changing attitudes about the U.S. dollar.

Kishore Mahbubani, The Great Convergence: Asia, the West, and the Logic of One World (New York: Public Affairs, 2013).

Mahbubani identifies seven geopolitical areas in critical need of reform and provides solutions for improving the global institutional order. Mahbubani draws from logic of globalization and the “logic of one world” to claim that the world is “converging towards peace.”

Kahler and Lake explore the effects of the Great Recession, with special emphasis on the political causes and consequences. They examine economic crises across time and countries, highlighting how crises have forced the rethinking of interests at both the level of individual attitudes and of political coalitions. The authors maintain that international economic crises with political effects have been pervasive through history and are likely to persist.

Tai Ming and contributors explore the state of the Chinese defense industry and its implications for international security. Authors discuss critical topics to understanding China’s emergence as a defense-technology leader with insights into “the relationship among defense contractors, regulators, and end-users; civil-military integration; China’s defense innovation system; and China’s place in the global defense economy.” Kennedy and Johnson analyze China’s 13th Five-Year Plan, which provides insights into China’s changing policy processes and objectives. This newest place emphasizes manufacturing, innovation, and encouraging development of advanced technologies while also prioritizing environmental protection and a social safety net.

Peter Gourevitch, David Lake, and Janice Gross Stein (eds.), The Credibility of Transnational NGOs: When Virtue Is Not Enough (Cambridge: Cambridge University Press, 2012).

While NGOs take on the tasks of monitoring the ethical practices of the private and public sector as well as the humanitarian tasks others will not, NGOs are often not monitored to the same extent. Authors provide a critique on the credibility of NGOs and explore the challenges associated with assessing whether they are fulfilling their intended humanitarian purposes.

Manuel Castells, Networks of Outrage and Hope: Social Movements in the Internet Age (New York: Polity, 2012).

Castells explores the emergence of new forms of social movements and protests in the world today, providing analysis of these social movements and how they add value to debates surrounding social change and political democracy. A driving point is the role of communication networks and the role of technology in these movements.

Wendy H. Wong challenges conventional wisdom that NGOs succeed when they pursue the “right” cause or have the greatest amount of resources. She instead argues the importance of internal coherence of an organization, and the way in which NGOs make and execute decisions. Wong maintains that NGOs which centralize agenda-setting but decentralize agenda-implementation have greater authority in international politics.

Authors provide the first extensive analysis on the outcomes of selective censorship of human expression. They show that censorship is aimed at forestalling collective action and thus by silencing dialogue that spurs social mobilization. However, authors assert that Chinese censorship gave some leeway in order to collect information on potential problems and trends in mass opinions.

Timothy Sinclair, The New Masters of Capital: American Bond Rating Agencies and the Politics of Creditworthiness (Ithaca, NY: Cornell University Press, 2008).

Timothy J. Sinclair assesses the role of rating agencies in the dynamics of modern global capitalism. Sinclair offers insights into the operations of these organizations, which wield enormous power in the global economy and international investment. Many observers assume rating agencies operate objectively and fail to see how these agencies massively influence public policy.

David Lake offers an alternative approach to understanding global governance which draws on social contract theory and begins with the central role of authority in political life. Lake makes the argument that global governance can be understood through a concept of relational authority, where authority is a social contract which provides political order in exchange for compliance with the rules necessary to supply political order.

Emilie M. Hafner-Burton explores the effect of trade agreements on human rights. She asserts that despite the challenges of enforcing good regulations and governments’ lack of incentives to protect human rights, trade agreements with human rights provisions have made a positive impact on the intended beneficiaries.

This book provides the first full-length study of the largest nongovernmental global regulatory network, which compares to the UN system in both scope and influence. Authors provide analysis on the impact of the ISO in commerce and economic infrastructure in the era of increasing globalization.

Adam Segal, The Hacked World Order: How Nations Fight, Trade, Maneuver, and Manipulate in the Digital Age (New York: Public Affairs, 2016).

In this book Adam Segal discusses a transformation in “world order.” For over 300 years, world order was formed by using military force, financial pressure, or diplomacy to solve conflicts that arose between nation-states. 2012 marked a significant change in world order, when Cyberspace became a new form of battlefield, exemplified by the U.S. Operation “Olympic Games” and cyber-espionage missions by Russia and China.

This literature provides insights on the challenges of open global internet. Among top concerns posed by internet use and governance is fragmentation of the internet due to technological developments, government policies, and commercial practices. The literature addresses Internet governance as a top concern for international relations and provide insights for addressing arising challenges.

Dealmaker Roberto Azevedo faced challenges to the Doha Round in WTO negotiations, where many member countries had disputes or desired renegotiations. Mr. Azevedo had been working hard in negotiations and ensuring that he is still seen as a proponent of the developing world. It is crucial that the Doha Round successfully completes in order for the WTO to assert its role in the global economy, in a time where large actors such as the U.S. are seeking regional agreements in frustration of WTO stalls.

Clyde Prestowitz, The Betrayal of American Prosperity: Free Market Delusions, America’s Decline, and How We Must Compete in the Post-Dollar Era (New York: Simon & Schuster, 2010).

Prestowitz provides an account of the erosion of American economic power, which has reached a decline as it competes with the might of China, Russia, and Saudi Arabia. He claims that Americans have been mistaken in focusing on consumption rather than production and lays out actionable steps to regain world leadership.

The Trade in Services Agreement is currently being negotiated by 23 members of the WTO and targets opening up markets and improving rules in specific sectors such as licensing, financial services, telecoms, e-commerce, maritime transport, and professionals providing services abroad. The goal of TiSA is to facilitate trade in services between like-minded countries in the WTO as well as encourage others to join.

United States International Trade Commission, Digital Trade in the U.S. and Global Economies, Part 2 (2014).

Digital Trade in the U.S. and Global Economies investigates the workings of digital trade and provides key findings at three levels: firm level, industry level, and economy-wide level. Analysis shows that digital trade contributes to the economy by improving productivity and reducing transaction costs. Moreover, digital trade facilitates communication, expedites business transactions, improves access to information, and improves market opportunities for SMEs.

Sabel argues that the debate over bottom-up and top-down governance reform is flawed because it disregards important organizational innovations. These organizational innovations, though not explicitly democratic, can be structured to have the same principles associated with democracy.

This paper proposes how to identify which method—price-setting or controlling of quantities—would be more advantageous.

David Victor, “Fragmented Carbon Markets and Reluctant Nations: Implications for the Design of Effective Architectures,” in Joseph E. Aldy and Robert N. Stavins (eds.), Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World (Cambridge: Cambridge University Press, 2007)

The author examines the design of the regime that would replace or extend the Kyoto Protocol in 2012, and suggests that his findings do not bode well for the Protocol.

George W. Downs, David M. Rocke, and Peter N. Barsoom, “Is the Good News about Compliance Good News about Cooperation?” International Organization, 50, no. 3 (Summer 1996)

The authors examine the extent in which deep cooperation has been achieved without enforcement and the strategic implications drawn from the evolution of increasingly cooperative regimes.

Joe Waz and Phil Weiser, “Internet Governance: The Role of Multistakeholder Organizations,” Journal of Telecommunications and High Technology Law, 10, no. 2 (2013)

The authors discuss the importance of multistakeholder organizations, and propose new research that should be done in order to understand the involvement of MSH organizations in internet governance.

This paper argues that entering human rights institutions can provide benefits for democratizing states. Although sovereignty costs vary across institutions, the authors find that democratizing states typically join institutions that have larger constraints on state sovereignty.